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Facts
The assessee, an individual, had not filed her income tax return for AY 2017-18. The Assessing Officer (AO) initiated reassessment based on information that the assessee acquired immovable property, with her grandfather paying Rs.49,48,500/-. The AO made an addition of Rs.71,53,250/- under Section 56(2)(vii)(b) of the Income Tax Act, 1961, holding that the consideration paid was less than the stamp duty value on the registration date. The CIT(A) sustained this addition.
Held
The Tribunal found that the assessee's grandfather had entered into an agreement for sale on 16.10.2012, and the entire consideration was paid on or before that date, a fact not disputed by the AO. Applying the first proviso to Section 56(2)(vii)(b), the Tribunal held that when the agreement date and consideration payment precede the registration date, the stamp duty value as of the agreement date should be considered. Therefore, the addition based on the registration date's stamp duty value was incorrect, and the order of the CIT(A) was set aside.
Key Issues
Whether the stamp duty value of immovable property for the purpose of Section 56(2)(vii)(b) of the Income Tax Act, 1961, should be taken on the date of agreement or the date of registration, when the consideration for transfer was paid on or before the agreement date.
Sections Cited
147, 148, 143(2), 142(1), 144B, 2(47), 56(2)(vii)(b), 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH : VISAKHAPATNAM
Before: SHRI MANJUNATHA G & SHRI K. NARASIMHA CHARY
ORDER PER MANJUNATHA G, A.M. : This appeal filed by the assessee has been directed against the order dated 19.01.2024, of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC”], Delhi, relating to assessment year 2017-2018.
2 ITA.No.105/VIZ./2024 2. Facts of the case, in brief, are that the assessee is an individual and had not filed her return of income for the impugned assessment year 2017-2018. In this case, the Assessing Officer has received information from ADIT (Inv.), Unit-V(1), Vijayawada that assessee has acquired a property of 3788.22 sq. yards at Vuyyuru (v) vide sale deed dated 23.02.2017 and the entire sale consideration of Rs.49,48,500/- was paid in cash by the maternal grandfather of the assessee on 16.10.2012. Therefore, the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment and accordingly, reopened the case of the assessee u/sec.147 of the Income Tax Act, 1961 [in short “the Act”], after obtaining necessary approval from the Competent Authority.
2.1. The Assessing Officer noted in the "reasons for re- opening" and also ratified by the assessee in her reply that, Shri. Thummalla Ramkrishna Prasad (buyer and grandfather of the assessee) has paid an amount of Rs.49,48,500/- as consideration on 06.10.2012. But, on going through the petition filed by the Shri Thummalla 3 ITA.No.105/VIZ./2024 Ramkrishna Prasad (the grandfather of the assessee) in the Court of II Additional District Judge at Gudivada, Shri. Thummalla Ramkrishna Prasad has entered into an agreement to sale with Shri Mr. Madala Sai Kumar (the seller) to purchase the property for a total consideration of Rs.98,93,750/-. Out of this, Rs.96,93,750/- were paid to the seller before 06.09.2016 and the remaining Rs.2,00,000/- paid after the District Court, Gudivada's order. Thus, Shri Thummalla Ramkrishna Prasad (grandfather of the assessee) paid an amount of Rs.98,93,750/- to Shri Madala Sai Kumar (the seller) before the execution of registered sale deed and not Rs.49,48,500/-. Thus, the assessee has paid the consideration which is less by Rs.71,53,250/- than the stamp duty value of the property i.e., Rs.49,48,500/-. Therefore, the Assessing Officer made an addition of Rs.71,53,250/- as the income of the assessee by invoking provisions u/s 56(2)(vii)(b) of the Act under the head "income from the other source for A.Y. 2017-18.
4 ITA.No.105/VIZ./2024 2.2. The Assessing Officer accordingly issued notice u/sec.148 of the Act dated 30.03.2021 calling the assessee to offer her explanation. In response to the said notice, the assessee filed her return of income on 12.04.2021 declaring the total income of Rs.2,540/-. Thereafter, the Assessing Officer issued statutory notices u/sec.143(2) and 142(1) of the Act. The assessee also filed her replies dated 16.02.2022 and 04.03.2022. However, the Assessing Officer was not satisfied with the submissions of the assessee and assessed the income of the assessee at Rs.71,55,790/- by making addition of Rs.71,53,250/- u/sec.56(32)(vii)(b) of the Act under the head “Income from other sources” as against the returned income of Rs.2,540/- vide order dated 27.03.2022 passed u/sec.147 r.w.s.144B of the Income Tax Act, 1961.
On being aggrieved, the assessee carried the matter in appeal before the learned CIT(A). However, the learned CIT(A) sustained the addition made by the Assessing Officer by observing as under :
5 ITA.No.105/VIZ./2024 “7. Decision:- In view of the above facts, and circumstances, it is proved beyond doubt that, (i) The assessee's transaction with Mr. Madala Sai Kumar (the seller) is a separate transaction as mentioned in section 2(47) of the Act. (ii) the assessee has paid Rs.98,93,750/-, through her grandfather Shri Thummalla Ramkrishna Prasad for the purchase of the property, the stamp value of which is at Rs.1,70,47,000/-, (iii) As per the provisions of section 56(2) (vii) (b) the assessee has paid the consideration which the less than stamp duty value of the property by Rs.71,53,250/- (17047000-9893750] Therefore, an addition of Rs.71,53,250/-is made to the income of the assessee u/s 56(2) (vii) (b) of the Act, under the head "income from other sources" for A.Y. 2017-18. As the assessee has misreported the income of Rs.71,53,250/- , penal proceedings u/s 270A of the Act are initiated separately.
8. Reply to the show cause notice:- draft assessment order, along with the above was forwarded to the assessee as "Show cause notice" on 17/03/2022 and she was requested to reply within two days. In reply, she has repeated the same points which were already submitted by her in earlier reply and already considered in the draft assessment order. The assessee tried to derive the meaning favourable to her from the provisions of the Act which is not permissible. In this regard, it will be convenient to notice the relevant rules of construction. The classic statement of Rowlatt J. in Cape Brandy Syndicate Vs. Inland Revenue Commissioners still holds the field. It reads :
6 ITA.No.105/VIZ./2024 “In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used". Further, the assessee has not challenged the stamp duty valuation before the sub registrar or during the assessment proceedings. Therefore, the issue of referring the matter to the DVO does not arise. Therefore, the addition of Rs. 71,53,250/- made in the draft assessment order u/s 56(2)(vii)(b) of the Act, under the head "income from other sources" for A.Y. 2017-18 is hereby confirmed. As the assessee has misreported the income of Rs. 71,53,250/-, penal proceedings u/s 270A of the Act are initiated separately." On consideration of the submissions made by the Appellant and perusal of the assessment order, the undisputed fact is that a total amount of Rs.98,93,750/- (which includes the amount of Rs.49,48,500/- paid in 2012) has been paid by Appellant's grandfather to Mr. Madala Sai Kumar against transfer of the immoveable property in question to the Appellant. The immoveable property, per se, was neither registered in the name of Appellant's grandfather nor was ever in his possession. No credible documents in this regard have been furnished by the Appellant either in the course of assessment proceedings or in the course of present proceedings. Therefore, the question of gifting the said property by Appellant's grandfather to her does not arise at all since the said property was never owned/possessed by Appellant's grandfather. What the Appellant's grandfather has gifted to her is the money amounting to Rs.98,93,750/- paid to Mr Madala Sai Kumar (on her behalf)for transferring the ownership of the property to the Appellant. In lieu of the said consideration, Mr Madala Sai Kumar has finally registered the said property in the name of the 7 ITA.No.105/VIZ./2024 Appellant vide agreement dated 23/02/2017. It is in this background that the AO has invoked the provisions of section 56(2)(viib) in respect of transfer of an immoveable property to the Appellant vide agreement dated 23/02/2017. On this date i.e. 23/02/2017, the stamp duty value of the property in question was Rs.1,70,47,000/-. This has not been disputed by the Appellant. The total consideration paid by Appellant's grandfather (on behalf of the Appellant) to Mr Madala Sai Kumar was Rs.98,93,750/- (which includes the amount of Rs.49,48,500/- paid in 2012). This is also an undisputed fact. Thus, the difference amount of Rs.71,53,250/-(Rs.1,70,47,000 (-) Rs.98,93,750) is liable for addition u/s.56(2)(viib) of the Act in absence of any satisfactory explanation offered by the Appellant. The explanation that the property was gifted by her grandfather has already been rebutted above. In view of these facts and discussions made hereinabove, in my considered opinion, the AO has correctly invoked provisions of section 56(2)(viib) while making addition of Rs.71,53,250/-. Appeal is, thus, dismissed.”
During the course of hearing, Learned Counsel for the Assessee submitted that there is no dispute between the parties that the assessee is an individual and filed her return of income in response to notice u/sec.148 of the Act declaring total income at Rs.2,540/-. The only dispute of the Assessing Officer is that the assessee has paid cash payment of Rs.49,48,500/- for purchase of an immovable property of 3788.22 sq. yards at Vuyyuru (v) vide sale deed 8 ITA.No.105/VIZ./2024 dated 23.02.2017 which has been paid by assessee’s grand father Shri Thummalla Ramkrishna Prasad to Shri Mr. Madala Sai Kumar [the seller] as per the agreement of sale dated 16.10.2012 which is not disputed by either Assessing Officer or the learned CIT(A). He submitted that the assessee‘s grandfather has paid the impugned sum of Rs.49,48,500/- for purchase of the property to the seller viz., Madala Sai Kumar as per the original agreement dated 16.10.2012 which is evident from the recitals of sale deed dated 23.02.2017. He, therefore, submitted that the Assessing Officer cannot invoke jurisdiction u/sec.56(2)(vii)(b) of the Act to make the impugned addition of Rs.71,53,250/- being the differential sum between sale price and stamp value of the property as on the date of registration, in absence of not disputing the original agreement of sale dated 16.10.2012 and that the sale deed also satisfied that entire consideration of Rs.49,48,500/- has been paid in terms of original agreement of sale. He, accordingly, submitted that the orders of the authorities below should be set aside in the interest of justice.
9 ITA.No.105/VIZ./2024 5. The Learned DR, on the other hand, relied on the orders of the authorities below. He submitted that the assessee failed to prove that she has received Gift from her grand father and that there is no satisfactory reply from the side of assessee with respect to differential sum between stamp duty value as on the date of registration i.e., on 20.02.2017 of Rs.1,70,47,000/- and the total consideration paid by the assessee for purchase of the impugned immovable property to Shri Mr Madala Sai Kumar [seller] of Rs.98,93,750/- and, therefore, the Assessing Officer rightly made the addition of the differential sum of Rs.71,53,250/- [Rs. 1,70,47,000/- (-) Rs. 98,93,750/-] and brought to tax by invoking the provisions of sec.56(2)(vii)(b) of the Act which has been sustained by the learned CIT(A) after considering the submissions of the assessee. He, accordingly, submitted that that the orders of the authorities below should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The Assessing Officer made addition of 10 ITA.No.105/VIZ./2024 Rs.71,53,250/- u/ sec.56(2)(vii)(b) of the Act on the ground that where an individual, in any previous year, from any person, received any money without consideration or any immovable property for a consideration, which is less than the stamp duty value of the property by an amount exceeding 50000 rupees, the stamp duty value of such property has exceeded such consideration, shall be income of the individual. Since the assessee has received immovable property for a consideration, which is less than the stamp duty value of the property of an amount exceeding 50000 rupees, the difference between consideration paid for purchase of the property and the stamp duty value of such property be deemed to be the income of the assessee. It was argued by the Counsel for the Assessee that assessee’s Grandfather Sri Tummalapali Ramkrishna Prasad entered into agreement with Sri Madala Sai Kumar on 16.10.2012 for purchase of land to an extent of 3778.22 sq yards for a consideration of Rs.49,48,500/- and the entire consideration has been paid in cash. Further Sri Tummalapali Ramkrishna Prasad filed a suit for specific 11 ITA.No.105/VIZ./2024 performance before the court of law on 06.09.2016 and on a compromise petition before the Court, the Court allowed the parties to enter into sale deed and as per the agreement, sale deed has been executed by Shri Madala Sai Kumar in favour of the appellant-assessee Haripriya Kotapati on 23.02.2017. Since the consideration of purchase of the property has been paid in full in the year 2012, the stamp duty value as on the date of registration of the property i.e., on 23.02.2017 cannot be considered and thus, provisions of sec.56(2)(vii)(b) of the Act cannot be in force.
We find that the provisions of sec.56(2)(vii)(b) of the Act is applicable, where an individual, without consideration, receives any immovable property or for a consideration, which is less than the stamp duty value of the property of an amount exceeding 50000 rupees, then, the stamp duty value of such property has exceeds such consideration, shall be treated as income of the assessee. As per the proviso to sec.56(2)(vii)(b) of the Act, where the date of agreement fixing the amount of consideration for transfer of the immovable property and the date of registration are 12 ITA.No.105/VIZ./2024 not the same, the stamp duty value on the date of the agreement may be taken for the purpose of this clause. However, as per the second proviso, if the consideration has been paid by any mode other than cash on or before the date of agreement for transfer of such an immovable property, then, as per the first proviso, the consideration as per agreement to sale shall be taken. In the present case, going by the facts on record, there is no dispute with regard to the fact that the appellant-assessee’s grandfather had entered into an agreement of sale on 16.10.2012 and the entire consideration has been paid on or before the date of the agreement, which is evident from the recitals of sale deed dated 23.02.2017, where there is a reference of agreement for sale dated 16.10.2012 and payment for consideration of Rs.49,48,500/-. Further, the sale deed also says that entire consideration of Rs.49,48,500/- has been paid in terms of agreement dated 16.10.2012. In fact, there is no dispute from the Assessing Officer about the agreement dated 16.10.2012 and consideration paid before the date of agreement. The only dispute is, with regard to 13 ITA.No.105/VIZ./2024 the mode of payment of consideration. Although, the assessee has paid consideration in cash, in our considered view, since the Assessing Officer did not dispute the agreement of sale dated 16.10.2012 and consideration paid for purchase of the property before the date of agreement and further, the said agreement was referred to in the sale deed dated 23.02.2017, it is to be considered that the first proviso to sec.56(2)(vii)(b) of the Act has been satisfied. Since the first proviso to sec.56(2)(vii)(b) of the Act has been satisfied, in our considered view, the consideration as per agreement of sale dated 16.10.2012 needs to be considered. If we consider the agreement of sale dated 16.10.2012, in our considered view, there is no difference in stamp duty value of the property and thus, the reasons given by the Assessing Officer that the stamp duty value of the property as on the date of sale deed is considered for the purpose of sec.56(2)(vii)(b) of the Act is incorrect and devoid of merit. The learned CIT(A) without considering the relevant facts, simply sustained the addition made by the Assessing Officer. Thus, we set aside the order of the learned CIT(A)
14 ITA.No.105/VIZ./2024 and direct the Assessing Officer to delete the addition made u/sec.56(2)(vii)(b) of the Income tax Act 1961.
In the result appeal of the assessee is allowed.
Order pronounced in the open Court on 18.03.2025.